Tipping Euro / Dollar Rate to Fall to 1.05

The euro to dollar exchange rate conversion has fallen below the key level at 1.10 - where next?

The euro remains fundamentally undermined by the actions at the European Central Bank (ECB) who are at the mid-way point of a project to dump 60BN euros on the Eurozone economy in order to keep it inflated.

But, as we have also noted, the Eurozone economy has been improving of late, as such the currency has failed to substantially lose value.

Nevertheless, the outlook remains overwhelmingly negative and near-term direction is tipped to favour a decline to support at 1.08.

At the time of writing we see the EUR-USD trade at 1.0877 while banks are seen quoting towards 1.04 and independent providers at 1.08.

Technical researchers at SEB say that the decisive break and close below 1.0916 has increased the probability that we actually have put a correction high in place and that we hence have resumed the underlying bear trend.

“More pieces of bearish information will be given when passing 1.0819 and 1.0670. For today however there’s a clear risk that we will see some short covering ahead of the weekend and a move up into the low – mid 1.09’s would be too surprising,” says a note from the Scandanavian Bank.

Lloyds Bank are also forecasting weakness citing the ECB’s QE programme.

“A break of 1.0820/00 interim range support is needed to open the way to the 1.05/1.0450 previous lows, while EURGBP needs to breakdown through important support at .6940/30,” say Lloyds.

Fundamental Outlook: PMI's on Tap

Turning to the fundamental picture, the market is likely to get further confirmation that Greece led to limited pass-through to the economy with the flash PMIs due for release on Friday the 24th of July.

"We see decent upside risks to both German manufacturing and French services PMIs. The market looks for a flat reading in Germany and small decline in France, while we look for at least a half point increase in both which should keep the euro supported as markets await further clarity from the Federal Reserve," says Ned Rumpeltin at TD Securities in London.

If you are inclined to focus on Greece, the principal hurdles that could have scuttled the deal at the last minute have passed.

So as the banks reopen on Monday, we should see further stress relief though there will still be some focus on what the plans will be for a government reshuffle.

After all, the stability of the ruling coalition is the final soft spot to completely moving forward.